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Cadence board decides CBC deal superior

Editor's note: This story is a continuation of details involving the events in recent months leading up to the proposed sale of Cadence Bank to Community Bancorp based in Houston, Texas.

Cadence's board ultimately decided an offer from Community Bancorp was superior to the one they'd entered into with Trustmark days before and broke it off, a federal document shows.
A proxy statement filed this week on the proposed purchase of Cadence by Houston, Texas-based Community Bancorp provides extensive details on the events leading up to Cadence Bank dropping a previously-announced merger deal with Trustmark in favor of an arrangement with CBC.
A timeline picking up in September is as follows:
• Sept. 3: Cadence officials wrote an engagement letter with financial advisor Keefe, Bruyette & Woods, to ask the firm to offer financial advisory and investment banking services.
• Sept. 7: CBC officials send a letter to Cadence expressing their continued interest in the bank, proposing a price range of $2 to $3.50 per share of common stock with the condition of satisfactory due "satisfactory due diligence and approval of the U.S. Treasury," the statement reads. Cadence officials informed Trustmark of another party's continued interest.
• Sept. 13: Cadence officials informed Trustmark of their desire to take part in any discussions Trustmark was to have with the U.S. Treasury. Trustmark agreed to this request, Cadence officials said in the statement.
The Trustmark talks with the U.S. Treasury happened without Cadence's participation, Cadence officials said. Treasury officials expressed an unwillingness to sell the preferred stock to Trustmark for a total amount less than what common shareholders would get.
"Trustmark’s financial advisor indicated to us that Trustmark had reduced its proposed price per share of our common stock from $3 per share to $2 per share and unilaterally adjusted the exchange ratio based upon the closing price of the Trustmark common stock price of $20.64 on Sept. 14. Also on Sept. 13, CBC reiterated its interest in conducting more due diligence at Cadence's offices on Sept. 15.
• Sept. 15: The Cadence board talked over the "reduction of the price offered by Trustmark and the board’s disappointment that the Cadence team had not been offered the chance to be involved with Trustmark’s discussions with U.S. Treasury and that Trustmark had changed the exchange ratio," the statement reads.
Later in the day, Cadence officials reiterated to Trustmark their desire to be involved in future talks with Treasury officials and asked that Trustmark reconsider its $2 price. Trustmark replied theirs was a non-negotiable price and asked Cadence to sign the current definitive agreement draft without any more talks.
Cadence informed Trustmark they would not extend the exclusivity period which ended Sept. 15.
• Sept. 16: Cadence officials sent CBC a draft merger agreement and asked them to submit a proposal by Sept. 20. On the same day, CBC's loan portfolio evaluator came to Cadence to conduct due diligence and meet with bank officials. On this day and over the following several days, "we continued to negotiate a merger agreement with Trustmark and to respond to their due diligence requests," the statement reads.
• Sept. 17: CBC presented Cadence with a proposal of $2.50 per common stock share plus payments of more than $38 million to the U.S. Treasury for their preferred stock. Also, Trustmark indicates that Cadence much into a definitive agreement with them by Sept. 20 or Trustmark would halt talks with Cadence.
• Sept. 19: CBC provided "substantial comments to the form of merger agreement and expressed their willingness to continue negotiations on an agreement," the statement reads. Cadence officials proceeded with talks with both CBC and Trustmark.
• Sept. 20: Cadence officials reached agreement on the terms of a definitive merger agreement with Trustmark. On the same day, CBC sent an "interest that reiterated its $2.50 cash price. On the same day, the Cadence board met to review both proposals. "The board of directors considered all information available to them, including the fact that the CBC proposal potentially offered higher value than the current Trustmark proposal," the statement reads. But CBC had not concluded talks with the Treasury, negotiation with CBC was thought to take more time and a number of other issues remained outstanding on a possible deal with CBC.
"Considering the status of the negotiations with CBC, Trustmark’s threat to terminate discussions, the uncertainty as to whether a satisfactory merger agreement could be reached with CBC and the uncertainty as to, among other things, how long it would take to reach such agreement, the board of directors determined that the proposal from Trustmark was in the best interests of the shareholders and that we should move forward and execute a definitive agreement with Trustmark," the statement reads.
• Sept. 21: Cadence entered into a merger agreement with Trustmark. CBC sent a letter to the Cadence board expressing their continued interest in the bank along with a second letter stating CBC's desire to talk about "structural alternatives."
• Sept. 22: The deal with Trustmark was announced publicly after the market's close.
• Sept. 24: CBC expresses concern in a letter that the Trustmark merger was inferior to CBC's Sept. 17 cash offer.
• Sept. 28: The board considered – with outside legal counsel – whether the Sept. 24 CBC "constituted an 'Acquisition Proposal' under the terms of the agreement with Trustmark. Given the letter only expressed CBC’s disappointment and did not reflect their continued interest in pursuing a transaction or affirmatively state that it was reaffirming its offer," the statement reads. The board determined that the letter did was not an acquisition offer.
• Sept. 29: CBC officials send another letter to Cadence saying the Sept. 17 offer remained open and that CBC officials were ready to execute a transaction. The board concluded with outside counsel that CBC's third letter was an acquisition proposal and "failure to furnish information to CBC or participate in negotiations or discussions with CBC would or could reasonably be expected to constitute a potential breach of fiduciary obligations of the board of directors. The board of directors authorized counsel to provide information to and commence discussions with CBC in light of their fiduciary duties," the statement reads.
• Sept. 30: Cadence officials inform Trustmark of their receipt of an acquisition proposal.
• Oct. 1: Trustmark sends a letter to Cadence's board indicating they were aware of the receipt of the proposal and it was Trustmark's expectation Cadence would abide by their agreement with Trustmark.
• Oct. 2: CBC submits a proposed merger agreement and Cadence's legal counsel met with CBC's legal counsel and management.
• Oct. 3: CBC sends a revised merger agreement. On the same day, Cadence officials informed Trustmark and CBC that on Oct. 5, "they would each be given an opportunity to meet with our board of directors and that Trustmark and CBC should provide any additional information with respect to their respective proposals they would like the board to consider to KBW by 8 a.m. Oct. 5.
• Oct. 4: Trustmark sends a letter indicating there was no more information they wanted to supply the Cadence board of directors regarding their offer.
• Oct. 5, The board heard presentations from KBW on the financial terms of both offers "as well as from outside legal counsel regarding the fiduciary duties of the board of directors and factors they may consider in evaluating the two transactions, as well as the issues associated with terminating the Trustmark merger agreement," the statement reads.
CBC and Trustmark both made presentations. During their presentation, Trustmark officials said they would be open to a "collar" agreement to "limit the potential downside risk and upside opportunity of Cadence shareholder arising from changes in the value of the Trustmark common stock prior to closing," the statement reads. Later in the day, while the Cadence board was still meeting to review the proposals, Trustmark officials called to say they would be willing to raise their price by 25 cents and enhance certain provisions.
Trustmark officials said this was their final and best offer.
Following both presentations, the board considered both proposals and their impact on shareholders and others, closing risks and other matters. "Although Trustmark did not submit a revised offer in writing, nonetheless, the board of directors evaluated the additional consideration and other changes offered by Trustmark and determined that the revised Trustmark proposal was still inferior to the CBC proposal both as to price and other factors," the statement reads.
The board instructed outside legal counsel to finalize and obtain specific improvements to the CBC agreement. "After further consideration of the CBC proposal and the existing agreement with and the verbal offer from Trustmark, our board of directors determined that the proposal by CBC was superior to the Trustmark agreement and consistent with the proper exercise of the board of directors’ fiduciary duties," the statement reads.
The board then agreed to authorize an agreement and merger plan with CBC, subject to the termination of the Trustmark deal.
• Oct. 6: Cadence delivers notice of termination of the deal with Trustmark to them, along with the $2 million termination fee. CBC advanced the money for the fee to Cadence. Then, Cadence entered into the agreement with CBC and publicly announced it before the market opened on this day.